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I was thinking of learning Ruby with Rails for the purpose of developing one of two things. Either a replacement for the scripting part of my website (which does receive that sort of traffic) or to make a Project Management/CRM intranet system.

It sounds as if Ruby w/ Rails sounds viable for these projects. But certainly the Project Management/CRM system.

I just found installing RoR with Apache just too confusing and very frustrating, I used the on board server Webtrick (or something) and I followed a tutorial on the onlamp site and it worked fine... though you do need a mysql.so file and a .dll file for RoR to talk with mysql.

The problem with using the onboard server is that every now and again you have to restart the server (all done via command prompt or dos prompt)... and I find that bit very frustrating ...

There are packages out there such as Instant Rails and I recently saw an add-on for XAMPP but not investigated either in too much detail.

I have developed in both PHP(3 yrs) and RoR (since its release). I feel very confortable developing with RoR because framework takes care of most of the work we do (of course you might have your own PHP libraries that you reuse all the time but it will never be as powerfull as RoR's libraries).

RoR helps you to use some standards like MVC (I do love MVC -Model, View, Controller)structure, database model standarts. Even when I was developing in PHP I was trying to create my own MVC but it comes default with Rails now.

Ruby is a fantastic language to work with.
For example(I could not help myself);

i) It can be heavy if you write sloppy programs because it creates database queries for you. You should really check how you can optimize your calls to the database. I would strongly suggest to look at caching in RoR, it generates htmls on the fly and with observers it removes them when data has been changed.

ii) I prefer using with lighttpd/fcgi. There are not many hosts supporting RoR yet (www.textdrive.com is my preference right now; they support lighttpd/fastcgi)